Czech tech, media, and telecoms sectors most attractive to investors

The Czech business market saw a considerable decline in the number of mergers and acquisitions (M&As) that took place in the first half of 2023. However, this trend may reverse in the second half of this year as businesses find themselves with more cash and prepare for a potential M&A-related tax next year. Technology, media, and communications companies are the most likely to be merged or acquired.

Consulting company PwC revealed recently that 63 M&As took place between January and June this year, compared to 85 in the same period of 2022.

Around one in four of all M&As conducted in Czechia are in the fields of technology, media, or communications. Additionally, the energy sector holds strong appeal, driven by the growing emphasis on zero emissions and a low-energy economy, as well as an increasing global focus on environmental, social, and corporate governance (ESG). Solar farms and other renewable energy companies for example – on the rise in Czechia – are attractive to global investors.

Jan Hadrava, M&A director at PwC, explains that there are several reasons for the decline. The harmful financial effects from the Covid-19 pandemic are still lingering, he says, and high interest rates and inflation act as deterrents to large-scale business purchases. “There are also persistent concerns about the development of the economy and the uncertainty associated with the conflict in Ukraine,” he notes.

Miroslav Bratrych, Managing Partner at PwC, also says that despite ongoing macroeconomic influences, more stable interest rates and lower inflation could facilitate smoother transactions. He highlights a shift in market dynamics, with buyers now driving the market, a departure from the seller-driven landscape of recent years.

Despite the first half's challenging environment, Hadrava remains cautiously optimistic about the latter about July-December, foreseeing a potential resurgence in transaction numbers. He suggests that investors who amassed significant capital during the pandemic – and in the first half of this year – are now beginning to reinvest, which could bolster market activity. 

Another reason to expect a potential uptick in M&A activity is the introduction of a de facto tax on sold shares from companies, which is part of the government’s austerity package. If finalized and approved by Czech lawmakers, it will go into force from January 2024, therefore likely triggering a wave of M&As this year to avoid extra tax.